Exit Counseling Presented by: Don Buehrer

Why do I need to attend? Federal regulations require schools to provide exit counseling for students: − Who have borrowed a Stafford and/or Grad PLUS loan under the Federal Direct Loan Program (Direct Loan) and/or the Federal Family Education Loan Program (FFELP) and − who are graduating, have withdrawn or have dropped below half-time enrollment.

Promissory Note (MPN) An agreement to pay back loan(s) Details borrower rights and responsibilities Subsidized Loan − Need-based loan. Government pays interest while enrolled, during grace and deferments Unsubsidized Loan − Non-need based. Borrower responsible for all interest

When repayment begins Stafford loans have a grace period; repayment begins six months after student graduates, withdraws, or drops below half-time enrollment. PLUS (GradPLUS) loans have a deferment period; repayment begins six months after student graduates, withdraws, or drops below half-time enrollment. − Direct Loan Servicing Center or lender will send notification of your first payment due date during your grace/deferment period.

Borrower responsibilities Borrowing money is a serious matter and all loans must be paid back. Not receiving billing statement is not an excuse for not making payments. Even if you did not complete your program, didn't complete your program within the regular time for program completion, are dissatisfied with quality of education, or can’t find a job, you must pay back the loan(s).

Consequences of default Loss of federal financial aid eligibility Withholding of federal income tax refunds Inability to renew professional license (e.g., lawyer, doctor) Negative credit history (will affect credit purchase of house, car, etc.)

Consequences of default Wage withholding May be sued Collection fees and attorney’s fees assessed − Up to 33.3% Enforcement of delinquent debt collection procedures Not dischargeable via Bankruptcy

Texas Tech University Health Sciences Center During the past three years, 1,873 students have entered repayment. Only 8 have defaulted 2.1% rate for these three years National default rate is 8.8%

Attachment A: Sample monthly repayment amounts Loan Amount 4%5%6%7%8%9% $1,000$10.12$10.61$11.10$11.61$12.13$12.67 $10,000$101.25$106.07$111.02$116.11$121.33$ $20,000$202.49$212.13$222.04$232.22$242.66$ $30,000$303.74$318.20$333.06$348.33$363.98$ $40,000$404.98$424.26$444.08$464.43$485.31$ $50,000$506.23$530.33$555.10$580.54$606.64$ $60,000$607.47$636.39$666.12$696.65$727.97$ Interest Rates

Attachment A: Sample monthly repayment amounts Loan Amount 4%5%6%7%8%9% $70,000$708.72$742.46$777.14$812.76$849.29$ $80,000$809.96$848.52$888.16$928.87$970.62$ $90,000$911.21$954.50$999.18$ $ $ $100,000$ $ $ $ $ $ $110,000$ $ $ $ $ $ $120,000$ $ $ $ $ $ $130,000$ $ $ $ $ $ Interest Rates

Attachment A: Sample monthly repayment amounts Loan Amount 4%5%6%7%8%9% $140,000$ $ $ $ $ $ $150,000$ $ $ $ $ $ $160,000$ $ $ $ $ $ $170,000$ $ $ $ $ $ $180,000$ $ $ $ $ $ $190,000$ $ $ $ $ $ $200,000$ $ $ $ $ $ Interest Rates

Your repayment schedule Stafford Loan Balance* − $160,000 Anticipated Monthly Payment − $ 1,841 No. of Payments =120 Interest Rate = 6.8% Total Interest Paid − $60,955 Total Amount Paid − $220,955 * Loan balance is based on the school’s average indebtedness and payment is calculated using the Standard Repayment Plan PLUS Loan Balance* − $ 7,654 Anticipated Monthly Payment − $ No. of Payments = 120 Interest Rate = 8.0% Total Interest Paid − $ 3, Total Amount Paid − $ 11, * Loan balance is based on the school’s average indebtedness and payment is calculated using the Standard Repayment Plan

Repayment plans Offered under both FDLP & FFELP Standard Graduated Extended Income-based Specific to loan program Income-contingent (FDLP) Income-sensitive (FFELP)

Repayment plans For all repayment plans, student can: − Prepay loans without penalty; − Pay on a shorter schedule; and − Change repayment plans once per year.

Standard Repayment Plan Lowest total loan cost Regular payments of both principal and interest are due monthly, excluding periods of deferment and forbearance Minimum monthly payment is $50 10-year repayment term

Graduated Repayment Plan Monthly payments are smaller at the start of the repayment period and gradually increase every two years 10-year repayment term Total amount paid in interest will be greater than under the standard repayment plan

Extended Repayment Plan Lengthens repayment term up to 25 years Available to borrowers with more than $30,000 in federal student loans (per program) Total interest costs may be higher over life of the loan, although monthly payment amount may be lower

Income-Based Repayment Plan (IBR) Borrowers may qualify for lower monthly payments as determined by adjusted gross income, federal student loan debt, and family size After 25 years (300 payments), remaining balance and accrued interest may be forgiven Must reapply annually ibrinfo.org

Income Based Repayment Any Stafford, GradPLUS or Consolidation Loan made under either FFELP or FDLP is eligible for repayment under IBR, EXCEPT loans that are currently in default, parent PLUS Loans, or Consolidation loans that repaid a parent PLUS Loan

Repayment Comparison The Income Based Repayment plan example is calculated based on an annual gross income of $30,000 and a family size of one living in the USA. Monthly payment amounts under the IBR plan may change annually based on the borrower’s annual gross income and family size. Any remaining balance, including interest, is forgiven after 25 years of qualifying payments

Repayment Comparison ($45,000) StandardGraduatedExtendedIncome Based Income Sensitive (FFEL ONLY) Income Contingent (DL ONLY) Monthly Payment $518Yrs 1-2 $356 Yrs 3-4 $432 Yrs 5-10 $647 $312Min $172 Max $518 Yr 1 $100 Yrs 2-10 $582 Yr 1 $320 Max $400 Term10 Years10 years25 years 10 years17 years Total Interest $17,143$20,500$48,701$59,997$19,061$44,505 Total Paid$62,143$65,500$93,701$98,130$64,061$78,505

Income-Sensitive Repayment Plan Offered only to borrowers under the FFELP Monthly payment varies according to gross monthly income Monthly payment covers at least monthly accruing interest Must reapply annually Total interest costs will be higher over the life of your loan than with standard repayment Maximum repayment period is 10 years

Repayment Comparison The Income Sensitive Repayment Plan is calculated based on an annual gross income of $30,000 and a family size of one living in the USA. Total interest paid over the life of the loan and the term will vary depending on the percentage of income that the borrower chooses to allocate each year to the loan payment. Only offered for FFEL Loans

Repayment Comparison ($90,000) StandardGraduatedExtendedIncome Based Income Sensitive (FFEL ONLY) Income Contingent (DL ONLY) Monthly Payment $1,036Yrs 1-2 $711 Yrs 3-4 $865 Yrs 5-10 $1, $625Min $172 Max $548 Yr 1 $100 Yrs 2-10 $1,179 Yr 1 $320 Max $827 Term10 years 25 years 10 years25 years Total Interest $34,286$41,000$97,398$97,909$38,580$146,603 Total Paid$124,286$131,000$187,398$98,564$128,580$168,964

Income-Contingent Repayment Plan Offered only to borrowers under the Direct Loan Program Monthly payment based on adjusted gross income, family size, and total Direct Loan debt If payment does not cover interest accrued, unpaid amount is capitalized annually. Maximum repayment period is 25 years and any balance after 25 years (time spent in deferment or forbearance does not count) is forgiven.

Repayment Comparison The Income Contingent Repayment plan example is calculated based on an annual gross income of $30,000 and a family size of one living in the USA. This repayment amount will be recalculated annually and is subject to change, based on the poverty guidelines per family size as determined by the U.S. Department of Health & Human Services. This plan has a maximum term of 25 years and is only offered for Direct Loans

Repayment Comparison ($135,000) StandardGraduatedExtendedIncome Based Income Sensitive Income Contingent Monthly Payment $1,554Yrs 1-2 $1,067 Yrs 3-4 $1,297 Yrs 5-10 $1,941 $937Min $172 Max $548 Yr 1 $100 Yrs 2-10 $1,777 Yr 1 $320 Max $915 Term10 years 25 years 10 years25 years Total Interest $51,430$61,500$146,100$98,564$58,099$169,833 Total Paid$186,430$196,500$281,100$98.564$193, 099$170,905

Loan consolidation Option to combine federal education (not private loans) loans Loans must be in grace or repayment status Original loans are paid in full − New loan for the combined balances is issued with new terms, including a new interest rate that is fixed for the life of the loan

Special Direct Loan Consolidation Program Must have FFEL and DL Fixed rate (not to exceed 8.25%) after applying a 0.25% interest rate reduction to the FFEL loans being consolidated Each loan that is consolidated retains its original repayment term.

Consolidation — factors to consider Negatives − Total interest paid may be greater − May extend repayment period − May lose benefits (e.g., grace period, loan forgiveness, cancellation, deferment, or a reduced interest rate)

Consolidation — factors to consider Positives − May significantly lower monthly payments − Simplifies repayment — one monthly payment − No minimum or maximum loan amounts or fees with Direct Loan consolidation

Consolidation tips Compare and weigh all options For more information on consolidating your loans, and how to apply go to −

Split Loan Issues Loans owned and serviced by lenders Loans owned by DOE and serviced by federal servicers − Nelnet, Great Lakes, FedLoan Servicing, Sallie Mae, and several non-profits Direct Loans

Deferments and Forbearances No specific deferments for medical students No longer eligible for an Economic Hardship deferment Most medical students select residency forbearance or graduate fellowship deferment $160,000 loan at 6.8% interest generates appx. $3,574 of interest in 120 days.

Deferments A deferment is a period of time when payment on a loan is temporarily postponed. Interest payment − Federal Government pays the interest during deferments for subsidized loans and for the underlying subsidized loans that were consolidated − Borrower is responsible for the interest for unsubsidized loans and GRAD and PLUS loans and for the underlying unsubsidized loans that were consolidated

Types of Deferments Enrolled at least half time in an eligible postsecondary institution Unemployed or experiencing economic hardship ( limited to 3 years) Military service, including the National Guard Studying full time in a graduate fellowship program or an approved disability rehabilitation program Continue to make your payments until you have been notified by your servicer/lender that your deferment has been granted.

Forbearance Forbearance is a temporary postponement or reduction of payments for a period of time − Personal problems such as poor health or economic hardship − Affected by circumstances such as a national emergency, military mobilization or natural disaster − Are servicing in a position that may, after a specified period of service, qualify you for loan forgiveness, partial repayment of your loan or a national service educational award

Forbearance The borrower is responsible for the interest that accrues during a forbearance. Recommendation − Pay at least the interest as it accrues during forbearance. − Capitalization of interest Interest is added to the principal balance of the loan…increases debt and has you paying interest on interest

Mandatory Forbearance Medical or dental internship or residency Have student loan payments that are 20% or more or your monthly income Have payments being made for you by the Department of Defense

Loan Forgiveness Death Total and permanent disability Your school fails to pay a refund as required if you withdraw You are unable to complete your program of study due to school closure Your loan was falsely certified as a result of crime or identity theft Your school falsely certified or fraudulently completed a loan application in your name without your approval

Teacher Loan Forgiveness Program − All federal loans issued after October 1, 1998 − You teach as a highly qualified teacher in a qualifying low-income school for 5 consecutive, complete academic years − The loan for which you are seeking forgiveness was made before the end of the 5 th year of your qualifying teaching service

Public Service Loan Forgiveness Program For FDLP borrowers ONLY − Have made 120 monthly payments on the eligible loan on or after October 1, 2007, while servicing in a public service position, and − Are employed in a public service position at the time forgiveness is requested − Additional criteria available at −

Debt Management Strategies Make a budget Loan payments are a fixed cost like utilities and rent Be realistic about expected earnings for your major Stick to one credit card. Keep in mind that credit cards are loans! Contact the holder of your loan if you have trouble making payments − Change repayment plans if necessary

Debt Management Strategies Needs Food Housing Utilities Clothes Transportation Child care Wants Eating out Premium Cable TV package Vacation Video games New car vs. used car New computer

Debt Management Strategies Define your goal − How long do you want to be in debt − How much do you want to save for retirement Distinguish wants from needs Stick with your plan and resist temptation of unnecessary spending Sacrifice in the short-term for long-term rewards

Accessing your loan information National Student Loan Data System (NSLDS) − U.S. Department of Education's central database for student aid − NSLDS receives data from schools, guaranty agencies, the Direct Loan program, and other Department of Education programs − − Need a PIN for access

Reminders Keep copies of all correspondence Keep the Direct Loan Servicing Center or lender informed of status changes (e.g., address change or going to graduate school) Direct Loan borrowers − − or (TTY) FFELP borrowers − Know your lender’s phone number

Problem resolution process Federal Student Aid Ombudsman of the Department of Education − Helps resolve disputes − When you have done all you can do yourself and haven’t been able to reach a solution, the Ombudsman provides a process and resources to assist you, the student. −

Contact Information − Overview of loan repayment, deferment, forbearance and forgiveness programs − Overview of all of your federal loans, including amounts, interest rates, lender, servicer, status